Slovenia introduces a permanent FI regime: key points for investors

Introduction

As we have been tracking in this blog, every month brings news of another EU Member State introducing or reviewing a foreign investment regime. Except that in July it is actually two – Slovenia and Belgium (we will be publishing an updated version of this blog post next week).

Starting with Slovenia, the country has had a temporary FDI regime in place since the onset of the Covid pandemic. This was set to expire at the end of June 2023 but has been replaced with a permanent system effective from 1 July 2023.

Who is a foreign investor?

Under the FDI Regime, only non-EU investors are considered foreign investors. This is a move away from the previous regime, which regarded all non-Slovenian entities as foreign investors.

Do minority investments trigger a filing?

Investments of 10% or more of equity or voting rights in a Slovenian incorporated entity (operating in a sensitive sector) will trigger a filing. Importantly, subsequent acquisitions in the same entity of 10% are also caught. This means that acquisitions that do not grant control can be caught by the Slovenian regime and gradual stake-building can result in multiple filings.

What are sensitive sectors that require a filing?

Sensitive sectors closely reflect Article 4(1) of the EU FDI Screening Regulation and include:

• critical infrastructure;
• critical technologies and dual use items;
• supply of critical inputs;
• access to sensitive information, including personal data;
• the freedom and pluralism of the media; and
• certain projects of EU interest (as referred to in Annex 1 to the EU FDI Screening Regulation). 

When to file?

The FDI Regime introduces a statutory deadline to file for an FDI clearance. Filings need to be made within 15 days from:

• entering into transactional documents;
• publishing a public takeover bid; or
• incorporating a new entity (for greenfield investments).

Procedural aspects

While the FDI Regime remains non-suspensory (i.e. approval is not required prior to closing), it is mandatory and comes with a (potentially) lengthy review process, which is broadly divided into two phases:

• Preliminary review: During this stage, the Notification Commission (a special body established for this purpose) will review whether the transaction is notifiable under the FDI Regime.

If the transaction is: (i) not notifiable (e.g. the parties file out of caution, but it turns out their activities do not fall within one of the sensitive sectors); or (ii) where it is clear that the investment won’t have a significant effect on national security, then the review is completed and does not proceed to a full investigation.

• In-depth review: If the Notification Commission considers that a transaction could jeopardise national security, it can open an in-depth review. This comes with a lengthy review period of up to 2 years. Once the Notification Commission draws up its report, the relevant ministry has two months to issue a decision on the transaction.

The ministry can either: (i) clear the deal unconditionally; (ii) clear it with remedies (e.g. committing not to license IP to non-friendly jurisdictions, committing not to transfer the target’s operations abroad, etc.); or (iii) block the transaction.

Fines for failure to file?

Fines for failure to file depend on the size of the company. The relevant ministry can impose a fine of EUR 100-250k for mid-size companies and EUR 200-500k for large companies. In practice, institutional investors will likely qualify as large companies under Slovenian law.

Top tips for foreign investors

Investors should consider the applicability and timing implications of the FDI Regime when making a foreign investment in Slovenia. Transaction documents can then incorporate any necessary protections, with parties needing to consider, for example, the conditions precedent that may be required, the risk allocation between the parties, and co-operation mechanisms and / or strategy. While the regime is not suspensory, closing the deal before receiving clearance could lead to a difficult unscrambling operation if remedies are ultimately required, and investors will need to consider how to mitigate the potential enforcement risk.

It will also be important to develop a regulatory engagement strategy to obtain the necessary approvals and to ensure co-ordination with filings being made in other jurisdictions (particularly other EU jurisdictions, given the co-operation requirements under the EU FDI Screening Regulation).